The Top Penny Stocks
They laughed when he started trading penny stocks, but their jaws dropped when he landed a feature story in The Verge.
One summer, Connor Bruggemann opened up an e-trading account, using approximately $10,000 he had saved up working as a busboy. At first, Bruggemann plowed his savings into safe, large-cap stocks like Apple, Verizon, and a few others. But it wasn’t until Bruggemann began trading penny stocks that he started making real money. (Source: “Meet the high schooler who made $300K trading penny stocks under his desk,” The Verge, December 3, 2014.)
Bruggemann started putting almost everything into American Community Development Group Inc, a penny stock that was trading for $0.003 a share at the time. With his “iPhone” in hand, the 16-year-old high school junior from New Jersey would move in and out of penny stocks between classes. Over the next year, Bruggemann would turn his original $10,000 stake into more than $300,000, principally trading the top penny stocks.
The Real Dirt on Trading Penny Stocks
Of course, Bruggemann is an exceptional case. Not everyone is going to strike it rich trading penny stocks from their English class. But his story does illustrate the serious upside from the stock market’s bargain bin.
Combing through penny stocks can be a great source of investment ideas. After all, small investors are able to buy a larger number of shares. It’s also a lot easier for a share price to surge from $0.05 to $0.10 than from $50.00 to $100.00.
Even better, penny stocks don’t tend to draw much attention from Wall Street. In fact, most mutual funds are restricted from buying penny stocks completely. This gives the retail investor who can tread where he pleases an edge.
But it isn’t all sunshine and lollipops.
At worst, the penny stock world is a cruel and shallow money trench where hustlers and thieves run free. Many companies are outright frauds. Penny stock promoters stay one step ahead of regulators.
At best, the penny stock universe is a last refuge for dead, or soon to be dead, companies. After all, if a business had great prospects, it wouldn’t be trading over the counter. In either scenario, the odds are against the average investor.
But for those willing to do their homework, trading penny stocks can be lucrative. It just requires due diligence, a nose for BS, and a lot of common sense.
To help get you started, I’ve highlighted 10 of my best penny stocks for 2016. This is not a list of “Buy” recommendations. Rather, it’s a helpful place to begin your research before investing in penny stocks.
The 10 Top Penny Stocks for 2016
1. Hecla Mining Company (NYSE:HL)
For a long time, precious metal mining stocks were trading for less than $5.00 with no takers. But then 2016 started, stocks tanked, and silver and gold were on everyone’s radar.
A lot of excellent precious metal mining penny stock companies soared above the $5.00 threshold in the early part of 2016, including Pan American Silver Corp. (TSE:PAA, NASDAQ:PAAS) and Coeur Mining Inc (NYSE:CDE).
One precious metal mining penny stock with excellent momentum is Hecla Mining Company (NYSE:HCL). It’s the largest primary silver producer in the U.S. and the oldest NYSE-listed precious metal mining company in all of North America. The company currently has four operating mines in North America and a number of exploration properties and pre-development projects.
In 2015, the company reported record silver (11.6 million ounces) and silver equivalent (12.03 million ounces) production. This represents the 10th consecutive year Hecla has reported record silver reserves. (Source: “Hecla Reports 2015 Sales of $444 Million,” Hecla Mining, February 23, 2016.)
There’s plenty of reason to like Hecla Mining. Investors turn to precious metals as a hedge against economic uncertainty. There is a lot of that right now. First-quarter U.S. gross domestic product (GDP) growth was 0.5%, U.S. jobless data for the week ended May 7 climbed to a 14-month high, and April jobs growth was the weakest in seven years. On top of that, the global economy is terrible.
2. BioScrip Inc (NASDAQ:BIOS)
BioScrip Inc (NASDAQ:BIOS) provides infusion and home care services from over 70 locations across 28 states. The company’s team of clinicians (pharmacists, nurses, dieticians, and respiratory therapists) work with physicians to develop a plan of care that suits the patient’s specific needs.
Why BioScrip now? In fiscal 2015, the company’s revenue from continuing operations increased 6.5% year-over-year to $982.2 million. The company swung to full-year adjusted EBITDA from continuing operations of $15.9 million. At the end of 2015, BioScrip had $70.2 million of liquidity. (Source: “BioScrip Reports Fourth Quarter 2015 Financial Results,” BioScrip Inc, March 2, 2016.)
The increase came from the company’s financial improvement plan, which was introduced in August 2015. The plan has helped reduce costs, improve margins, and reorganize the business. By August 2016, BioScrip expects to realize $35.0 million–$40.0 million in annualized net cost savings, all of which should help improve long-term shareholder value. (Source: “BioScrip Announces Steps To Enhance Shareholder Value,” BioScrip Inc, August 10, 2015.)
3. Full House Resorts, Inc. (NASDAQ:FLL)
Full House Resorts, Inc. (NASDAQ:FLL) develops, owns, operates, and manages casinos and related hospitality and entertainment facilities in regional U.S. markets. The company operates four casino facilities in Mississippi, Indiana, and Nevada, and has agreed to acquire a fifth in Colorado.
In addition to growing its casino business organically, the company is always on the lookout to expand into new markets. In September 2015, Full House agreed to buy Bronco Billy’s, a casino-hotel located in Cripple Creek, Colorado. The agreement is expected to close in the second quarter of 2016. (Source: “Company Profile,” Full House Resorts, Inc., May 13, 2016.)
In 2015, net revenue increased 2.6% to $124.6 million. Adjusted EBITDA was up 30.5% at $14.0 million. The company’s full-year net (loss) improved significantly to ($1.3 million), or ($0.07) per common share, compared to ($20.8 million), or ($1.10) per common share in 2014. (Source: “Full House Resorts Announces Strong Fourth Quarter and Full Year 2015 Results,” Full House Resorts, Inc., March 21, 2016.)
On May 4, Full House announced that first-quarter revenue increased 10.1% to $32.0 million. Adjusted EBITDA climbed 66.7% to $3.6 million. Net (loss) for the first quarter of 2016 was ($330,000) or ($0.02) per share, compared to a (loss) of ($1.8 million), or ($0.09) per share in the same year-prior quarter. (Source: “Full House Resorts Announces Strong Results for First Quarter of 2016,” Full House Resorts, Inc., May 4, 2016.)
4. Asanko Gold Inc (TSE:AKG, NYSEMKT:AKG)
Asanko Gold Inc (TSE:AKG, NYSEMKT:AKG) is a penny stock (for now) that explores, develops, and produces gold in Ghana. Ghana is the second-largest gold producer in Africa and the eighth largest in the world. The company’s flagship property is Asanko Gold Mine, which covers an area of approximately 309.61 square kilometers. The project is fully financed, permitted, and has a gold resource base of 7.9 million ounces and reserves of 5.2 million ounces.
On January 7, Asanko announced the first gold production of approximately 400 ounces from Phase 1 of the Asanko Gold Mine. And on April 6, it announced commercial production and that it was on track for steady-state operations by the end of the second quarter of 2016. (Source: “Asanko Gold Announces Commercial Production and Provides Operational Update,” Asanko Gold Inc, April 6, 2016.)
At the end of March 2016, a total of 15,337 ounces of gold and 2,860 ounces of silver have been produced and shipped; 8,710 ounces of gold have been sold at an average price of $1,211 per ounce for sales of $10.6 million; and approximately 6,200 ounces of gold have been locked up in the processing circuit.
In the second quarter, Asanko expects to produce 35,000 to 40,000 ounces. For the second half of 2016, the company expects to produce 90,000 to 100,000 ounces, which is indicative of steady-state life of mine production rates.
As of March 31, 2016 Asanko had approximately $72.0 million in cash on hand.
5. CAS Medical Systems Inc (NASDAQ:CASM)
CAS Medical Systems Inc (NASDAQ:CASM) is a leading developer of non-invasive vital signs-monitoring technologies and products for patient data. The company’s products include: “FORE-SIGHT Absolute Tissue Oximeters,” blood pressure measurement technology, vital signs monitors, and supplies for neonatal intensive care.
The company sells its products to hospitals and other healthcare professionals in North America, Europe, Latin America, Africa, and the Pacific Rim.
On May 5, CAS Medical announced that net sales for the first quarter from continuing operations increased 21% to $5.5 million. Total sales, including sales from discontinued operations, were $6.1 million. (Source: “CASMED Reports First-Quarter 2016 Financial Results,” CAS Medical Systems Inc, May 5, 2016.)
In October 2015, CAS Medical sold assets related to its 740 “SELECT” vital signs monitoring product line and in March 2016, the company sold assets related to its neonatal intensive care disposables product line for $3.35 million.
As a result of a gain on the sale of the discontinued neonatal disposable product assets, the company recorded overall net income applicable to common stockholders for the first quarter of 2016 of $1.1 million, or $0.04 per share, compared to a net (loss) for the first quarter of 2015 of ($1.9 million), or ($0.08) per share.
6. Cenveo, Inc. (NYSE:CVO)
Cenveo, Inc. (NYSE:CVO) provides print-related products in the United States and internationally. Cenveo encompasses about two-dozen entities operating more than 100 facilities across the U.S., as well as manufacturing operations in Asia, South America, and Central America.
It operates through three segments: envelope, print, and label. Print and label are pretty obvious. The company’s commercial printing operations are devoted to the production of scientific, technical, and medical (STM) journals.
On May 11, Cenveo’s first-quarter net sales increased 0.7% year-over-year to $432.8 million. For the three months ended April 2, 2016, the company had income from continuing operations of $13.0 million, or $0.17 per diluted share, compared to a (loss) of ($8.2 million), or ($0.12) per diluted share, for the same period last year. (Source: “Cenveo Announces First Quarter 2016 Results,” Cenveo, Inc., May 11, 2016.)
Non-GAAP (loss) from continuing operations was ($1.7 million), or $(0.03) per diluted share, for the three months ended April 2, 2016, compared to a (loss) of ($3.2 million), or ($0.05) per diluted share, for the same period last year.
During the first quarter of 2016, Cenveo completed the sale of its packaging business for cash proceeds of $94.6 million. Additionally, in the first quarter of 2016, the company continued to address its capital structure by repurchasing a significant portion of higher interest rate debt instruments.
Commenting on the result, Robert G. Burton, Sr., chairman and chief executive officer, said, “As we enter the second quarter, we are encouraged by our operational results and progress over the last five quarters and also with our potential capital structure solutions. Our efforts to date this year put us in a position to achieve our 2016 financial goals and we reiterate our 2016 full year guidance.” (Source: Ibid.)
7. Arotech Corporation (NASDAQ:ARTX)
Arotech Corporation (NASDAQ:ARTX) is a leading provider of defense and security products including multimedia interactive simulators/trainers and portable power solutions for military, law enforcement, municipal, and homeland security markets.
The company’s weapon-simulation technology is built into all U.S. fighter planes; it services 80% of the global aviation market with its water-activated survivor locator lights; and since 2003, the company’s power systems division has been chosen twice as one of the U.S. Army’s “Ten Greatest Inventions.” (Source: “Overview,” Arotech Corporation, May 13, 2016.)
On May 9, Arotech announced that first-quarter revenue was up slightly at $25.4 million, compared to $24.2 million in the first quarter of 2014. The company reported a first-quarter net (loss) of ($644,000), or ($0.03) per basic and diluted share, compared to a (loss) of ($483,000), or ($0.02) per basic and diluted share, for the corresponding period last year. (Source: “Arotech Reports First Quarter Results,” Arotech Corporation, May 9, 2016.)
At the end of the first quarter, Arotech had $11.5 million in cash and cash equivalents. At the end of 2015, the company had $10.7 million in cash and cash equivalents.
As of March 31, 2016, the company had total debt of $15.3 million. At the end of 2015, Arotech had total debt of $20.3 million.
Subsequent to the end of the first quarter, Arotech said it received an “Indefinite Delivery Indefinite Quantity” award with a potential value of up to $40.0 million for its “MILO Range Training Systems’” simulator products. (Source: “Arotech Training and Simulation Division Announces IDIQ Award Valued at up to $40 Million,” Arotech Corporation, April 20, 2016.)
The multiple-award contract is for the provision of law enforcement training simulators and related equipment and services to the U.S. Department of State in support of its Bureau of International Narcotics and Law Enforcement Affairs (INL) training mission.
8. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a penny stock that designs technology that powers millions of intelligent devices, including personal computers, game consoles, and cloud services. The company’s products power everything from the Microsoft “Xbox One” and “Windows 10”-based laptops to “5K iMacs” and the “MacBook Pro.”
Trading near $3.70, the company’s share price is up 33% year-to-date. But thanks to its strong first-quarter results and outlook, AMD may not stay a penny stock for long.
On April 21, the company announced that first-quarter revenue plunged 19.2% year-over-year to $832 million. The company’s net (loss) also widened from ($0.13) per share to ($0.14) per share. (Source: “AMD Reports 2016 First Quarter Results,” Advanced Micro Devices, Inc., April 21, 2016.)
On the plus side, the company did beat Wall Street’s estimates of $819.1 million in revenue and ($0.15) in net (loss) per share.
On top of that, the future looks bright for Advanced Micro Devices. The company expects to report 15% sequential growth in its revenue (give or take three percent). That puts the company’s guidance range to between $931.8 million and $981.8 million—far better than Wall Street’s forecast of $890.8 million.
Advanced Micro Devices also announced that it formed a joint venture to license its processor and system-on-a-chip (SoC) technology. Partnering with Chinese company Tianjin Haiguang Advanced Technology Investment Co, AMD hopes to expand its presence in China’s server-chip market. The company is expected to receive $239 million in licensing fees and royalties from products sold by the joint venture.
9. Yamana Gold Inc. (TSE:YRI, NYSE:AUY)
Investing in penny stocks is all about opportunity and there is a lot of growth potential in precious metals.
Yamana Gold Inc. (TSE:YRI, NYSE:AUY) has precious metal properties and land positions throughout the Americas, including in Brazil, Chile, Argentina, and Mexico. The gold-mining company has total proven and probable reserves of 15.89 million ounces of gold, 99.09 million ounces of silver, and 3.0 billion pounds of copper. (Source: “Yamana Gold,” Yamana Gold Inc., last accessed May 13, 2016.)
During the first quarter, Yamana reported total gold production of 308,061 ounces compared to 299,108 in the first quarter of 2015. Yamana’s all-in sustaining cost (AISC) in the first quarter was $804.00 per ounce compared to $889.00 in the same prior-year period. Silver production increased to 1.9 million ounces. The first-quarter AISC for silver improved to $10.64 per ounce from $11.01 per ounce in 2015. (Source: “Yamana Gold Announces First Quarter 2016 Results,” Yamana Gold Inc., May 4, 2016.)
In 2016, Yamana expects to produce between 1.23 million and 1.31 million ounces of gold. The company’s silver production is projected to be between 6.9 million and 7.2 million ounces of silver and copper production is projected to be between 122 million and 125 million pounds. (Source: “Company Overview,” Yamana Gold Inc., May 13, 2016.)
10. Bombardier, Inc. (TSE:BBD.B)
In Canada, Bombardier, Inc. (TSE:BBD.B) is too big to fail and it’s not afraid to take handouts from its provincial and federal governments. That might be good news for patient penny stock investors.
Bombardier, Inc. manufactures and sells transportation equipment worldwide. In fact, it’s the world’s leading manufacturer of both planes and trains. The company’s business aircraft segment designs, manufactures, and provides aftermarket support for learjet, challenger, and global business jets. The commercial aircraft segment designs and manufactures a portfolio of commercial aircraft in the 60- to 150-seat categories.
Firstly, Bombardier isn’t going anywhere. It’s a major supplier of jobs in Quebec. And, if things get tough, the provincial government will step in, as will the federal government.
Back in October, the provincial government gave the company a $1.0-billion bailout to help it with its troubled “C Series” program. In exchange, the provincial government gets a 49.5% stake in a limited partnership that will take control of the assets, liabilities, and obligations of the C Series program just as the smaller “CS100” version of the jetliner nears certification. (Source: “Bombardier Inc to get US$1 billion from Quebec government to rescue troubled C Series,” The National Post, October 29, 2015.)
While the company maintains it doesn’t really need any money, it isn’t opposed to taking another $1.0 billion from the federal government, led by Canada’s doe-eyed prime minister, Justin Trudeau. That deal is still in the works.
While taking handouts sounds bad when it comes to considering a penny stock, the good news is that the company recently inked a major deal with Atlanta-based Delta for 75 C Series planes and options on 50 more. It is the biggest plane order in Bombardier’s history and the biggest C Series order to date, one that will carry the company’s struggling plane program into 2021. (Source: “Delta Air Lines and Bombardier Sign Largest C Series order for up to 125 Aircraft,” Bombardier, Inc., April 28, 2016.)
News of the sale helped rekindle talks with several U.S., European, and even Chinese carriers (China is the world’s fastest-growing aviation country). There have also been talks of Bombardier supplying C Series aircraft for an Iranian airline.
Bombardier’s share price is up almost 50% since the start of 2016 and remains bullish. Despite this, the share price shows plenty of resistance near $2.00. News of additional government intervention or a new contract with its C Series of planes could help it break through. The next resistance level is near $2.50. In 2014, it traded in a tight range near $3.80.
While past gains do not predict future ones, Bombardier does have room to run.